ECM Turning Point this Weekend


 

The Turning Point on the ECM is this weekend. We do happen to have a Directional Change next week in the Dow with the next turning point due the week of 12/04 and that is followed by the week of 12/18. What is most curious, is the fact that the Dow, Euro, Gold, and Oil all have the same timing targets, with oil showing the week of 12/04 is the strongest.

We are witnessing the global markets beginning to align. This is implying that international expectations are starting to dominate domestic or isolated market fundamentals.

We do not expect this turning point to be a monumental one. What this reflects is the markets are starting to align preparing for 2018 and the beginning of a new round of fun and games.

EU Concern Rising About Italian Debt


The EU Commission is deeply concerned that Italy is under pressure to spend frivolously because of the upcoming elections. The EU is apply more scrutiny for Italy’s huge sovereign debt. Because of the vast size of the Italian economy, the high level of total debt is a major cause for the Eurozone as a whole. The EU Commission sent a letter to the Italian government warning them not to deviate from the course of fiscal consolidation before the parliamentary elections in the spring.

Instead of creating simply a trade union, the idea that a single currency would save the day has seriously distorted reality. This idea of surrendering sovereignty by each member state to maintain a single currency if the worst possible design. Had the EU consolidated the debts and thereby created a federal EU debt, then each member state would have been responsible for themselves. In the USA, we have 50 states issuing debt in dollars, yet they have no part in the dollar. Had Europe consolidated the debts and drew the line in the sand at that moment, then states would be able to issue whatever debt the market would accept. This way, Brussels imposes austerity upon member states simply because they failed completely to comprehend the nation of the system they were creating.

Fed Admits it Does Not Understand The Markets


COMMENT: Mr. Armstrong; I must congratulate you on a fantastic conference. You explained that the central banks were clueless and that the Quantity Theory of Money was wrong and was being misapplied. Your Vertical Market Report explain that there were two types of vertical markets and nobody has ever discussed. Then this week, the London Financial Times reported that your head of the Fed, Janet Yellen, publicly admitted that the US Federal Reserve can not explain the development of inflation rates in the US this year. I was really taken back for you said exactly that at the conference.

You really do know what is going on behind the curtain.

Well done

Cheers

KT

REPLY. Yes, I am aware that Janet Yellen admitted on Tuesday that she does not understand the comparatively low rates of inflation, according to the Financial Times. This confirms what I have been saying that there are fundamental questions regarding the use of monetary policy of the central bank and the Quantity Theory of Money. The theory does not function as touted and it has been proven to be another myth along side rising interest rates causes the stock market to decline.

All of these theories have been created by attempting to create a single dimension cause and effect. There is much more complexity at stake which is just never taken into account. I went into great detail in the How to Trade a Vertical Market report to show WHY such booms and busts take place and they cannot be attributed to a single theory or monetary policy of the central banks. Such events took place long before there were even central banks.

Intellectual Froglegs – Thanksgiving Edition….


German Property Market – A Real Estate Bubble?


Asking €747,000

QUESTION: Possible Correlation with ECM-peak in Nov. 2017? Mr. Armstrong, just today I became aware of your story and your life’s work. Your theory is captivating, especially in the light of a series of unsettling changes in my work environment. All of this near Nov. 24-25, a predicted turning point within your ECM forecast. I am a self-employed agent, working mainly on behalf of a … German finance [company] which specializes in selling mortgages for public housing projects ….

Since it´s foundation … [we] operated with a strict lending limit of 80%. Upon so-called “customer-demand”, those limits have now been raised to enable 100% lending at almost the same interest rates (Nov. 9. 2017) while additionally allowing fixed interest rates for 25 years and amortization terms up to ca. 40 years. I have seen even more outrageous offers from competitors. These factors, combined with the unnaturally low-interest rates caused by the ECB, enable almost every household to acquire a house of one’s own.

However, these amortization terms fail to include future investments and a possible future increase in interest rates. In my opinion, households with an average income have a high risk of debt overload or at least a risk of constantly living in debt. It seems to me as if the public model of never repaying one’s debt is slowly being transferred to the private sector.

My observation might just be a small part of the picture, probably a peak in one minor cycle you observe. Yet it does make me feel uneasy, for this peak correlates with your next predicted ECM turning point. Although the public opinion states the opposite, I fear a massive housing bubble on the German market. Even minor changes in interest rates or household income could cause substantial problems for the average homeowner.

I would very much like to hear your thoughts on this subject. Please excuse my rusty English, I did not have practice for a very long time. Thank you in advance for your response. Also, I want you to know that I have the highest respect for your resolve in those times of imprisonment.

From Germany, FW

ANSWER: Unfortunately, Germany has allowed its own housing bubble not much different from the USA that burst in 2007. Normally, like fashion, things tend to start in Europe and then migrate to the USA. In the case of real estate, the value of property in areas such as Bavaria was very cheap compared to international levels. The market has been rising since 1996. Even back in 2015, Sparda Bank (http://www.sparda-bw.de) was offering just over 1% fixed rate mortgages for 10 years.

Our timing models do suggest that there is a pause in the trend due here in November (4th quarter). There should be a decline of softening in the market going into the first quarter of 2018. Thereafter, the trend will shift and the next big turning point will be the 4th quarter 2018.

The risk of fixed rates even out now for 25 years will not be on the back of the home-buyer. That risk will belong to the lenders. Yes, the ECB with its negative rates has caused tremendous distortions in the debt markets. They were unsuccessful in creating inflation or expanding the economy. What they have created is asset inflation, which does not show up in the economic statistics as they are focused upon by the media.

The central banks are focused on DEMAND inflation. That has been defeated by any expansion in the money supply is sterilized by a net rise in taxation. Consequently, the consumer is buying assets and hoarding cash. They are not spending it frivolously in dinner, wine, cloths, and song.

The risk to the borrower will be the rise in taxation that then eats into their disposable income. Lending 100%+ to buy houses is insane. Those who have no equity are highly prone to default. As this group defaults, they increase the supply of property coming to the market and thus all prices are suppressed. This is the process that creates the major high in REAL TERMS.

The homeowner who has equity will lose short-term. However, the euro will crack and in this regard, a low FIXED rate mortgage that they can maintain will be a HEDGE against the currency. The market will shift from asset inflation and cross-over to currency inflation.

Nonetheless, in terms of INTERNATIONAL VALUE, the market is peaking now in November. Housing prices have risen to world standards so the foreign capital will back off and not see this as cheap anymore. As the euro declines, then the property in real value terms globally will also decline.

Religious Persecutions have impacted Political-Economy


QUESTION: hi martin

question for you
if we fed the data and all the info you had on ISLAM – CHRISTIANITY – JUDAISM etc and all other religions into SOCRATES
and ask it …..what would its preferred choice be ……of RELIGION and what should the world follow…………what would SOCRATES say?
have you ever tried this thought experiment?
Regards
SS
ANSWER: Interesting question. I do not believe it would pick one for that is a subjective decision. It would forecast trends, but not which religion is better. What it does do is it will forecast religious upheaval, which is tied to economics. Change the economy and you create change in religion. The introduction of Communism followed Marx in banning religion.
During the 3rd century, it was the collapse of the monetary system of Rome that sparked the biggest wave of Christian persecutions. Why? The Pagans believed the gods were angry because the Christians would not pray to them. So the evils befalling upon the empire was blamed on the Christians. In turn, the Christain said their gods were impotent and only the true God would save them. Eventually, many Pagans left and became Christians praying for help.
Then there was the Spanish Inquisition headed by Tomás de Torquemada (1420–1498). Even the Pope came out against it. Nonetheless, the Spanish Crown used religion as the pretense to confiscate property and attacked both the Jews and the Arabs. This caused the Jews to flee mostly to the Netherlands. This is where banking and insurance became major in Amsterdam.
So religious persecutions have been had a major impact upon economics and the rise and fall of empires, nations, and city-states.

Long Conversation – President Trump Talks To Russian President Putin…


Yesterday while exiting the White House, President Trump told reporters he had just finished a 90 minute phone call with Russian President Vladimir Putin:

“We had a great call with President Putin. We’re talking about peace in Syria — very important. We’re talking about North Korea. We had a call that lasted almost an hour and a half. We’ve just put out a release on the call. But we’re talking very strongly about bringing peace for Syria. We’re talking about very strongly about North Korea and Ukraine.” (transcript)

Important to note that conversation was longer than would have been possible at any of the Bilat’s (Bilateral Discussion) during the ASEAN Summit or APEC Meeting in Asia.  A further review of the White House readout:

President Donald J. Trump today spoke with President Vladimir V. Putin of Russia for more than one hour. The presidents affirmed their support for the Joint Statement of the United States and the Russian Federation, issued at the Asia-Pacific Economic Cooperation Summit on November 11.

Both presidents also stressed the importance of implementing U.N. Security Council Resolution 2254, and supporting the U.N.-led Geneva Process to peacefully resolve the Syrian civil war, end the humanitarian crisis, allow displaced Syrians to return home, and ensure the stability of a unified Syria free of malign intervention and terrorist safe havens.

The two presidents affirmed the importance of fighting terrorism together throughout the Middle East and Central Asia and agreed to explore ways to further cooperate in the fight against ISIS, al-Qaeda, the Taliban, and other terrorist organizations.

President Trump and President Putin also discussed how to implement a lasting peace in Ukraine, and the need to continue international pressure on North Korea to halt its nuclear weapon and missile programs. (link)

♦President Trump wants Putin to withdraw any strategic interference surrounding the North Korea denuclearize plan he has assembled with regional allies and China.  President Putin would prefer being able to retain a position of influence toward the DPRK.

♦Russian President Putin seems to want Trump to shift/modify his position on allowing Bashir Assad to remain in power in Syria.  President Trump and SoS Rex Tillerson have outlined a prior plan for a regional governorship and a unity government framework.

It would appear there’s some deal-making in the works.

 

Is DNC Chair Tom Perez Trying “Broken Arrow” 2018?…


Aside from the common vernacular of ‘broken arrow‘ referencing a loss of a nuclear weapon it also means:

“a code phrase that a ground unit is facing imminent destruction from enemy attack and all available air forces within range are to provide air support immediately.”

In essence, with enemy completely overwhelming a position – a military commander calls in direct fire upon themselves in a last-ditch effort to at least retain some of their own forces in the aftermath.

For the sake of this discussion do not consider the reference ‘federal politicians’ (ie. DC congress and Senate); but rather consider the term “broken arrow” a metaphor for the totality of the past eight years and the collapse of the Democrat political apparatus in state House seats and state Senate seats.

Currently:

  • State House Majority Control: 38 states Republican / 12 states Democrat
  • State Senate Majority Control: 37 states Republican / 17 states Democrat / 1 state tied.
  • State Governors: 34 Republican / 15 Democrat / 1 Independent

If you put a blue marble on a table for each of the Democrat politicians in state office and a red marble on the table for each of the Republican politicians in state office the table would be roughly 65% red marbles and 35% blue marbles.

If you are DNC Chairman Tom Perez the challenge is daunting.  However, one rather extreme strategy would be to call in a “broken arrow” sledgehammer on the entire table.  If your attack smashed a quarter of the total marbles, the majority of the marbles smashed would be red.  Yes you would lose some blue marbles that way but your losses would be less than your opponent simply because you have less marbles on the table.

Still with me?

OK.  Now, think of that sledgehammer as “Sexual Harassment Claims”.

See the strategy?

Your political enemy has twice the exposure to risk.  Hollywood starts the narrative, and the Media can be counted upon to assist the strategy by over emphasizing the scale of the enemy losses and downplaying the scale of the friendly losses.

If you started with a total of 1,000 marbles (650 red, 350 blue) and lost 25% in the strike, the end result would be 250 casualties (163 red, 87 blue).  You would have killed off twice as many state/national republicans as you would state/national democrats.

It’s an extreme strategy; it’s a desperate strategy; but it’s a strategy nonetheless.    This is DNC Chairman Tom Perez we are talking about.  Former head of the DOJ Civil Rights Division (CRS); before becoming Obama’s head of the Department of Labor.

Perez is a life-long fellow Alinsky traveler inside the cause; and was ‘installed’ as DNC Chair the same way Hillary Clinton was installed as candidate in 2016.

Democrats, the institutional system that is constructed of people, are pretty good political strategists but their modern Achilles heel is their lack of patience.  The system supporting the ideological hand of Perez is demanding immediacy – they’re desperate.

The 2010 (“shellacking” of Obama) through 2014 gains were all Tea Party.  The 2016 gains, including the presidency, was MAGA; the evolution of the exact same people.  The Trump MAGA Team in 2016/2017 was the Tea Party Team in 2009/2010.  The commonality was/is ‘cold anger‘.  Strategic. Purposeful. Resolute. Deliberate. Long-term and sequential.

Current 2017 Democrat anger is hot.  It’s reactionary; easily provoked to act to spite itself. That anger is fueling stupid…. It thrashes. Look around, it’s childish.

Play stupid games, win stupid prizes.

Try stupid strategy, win stupid consequences.

Roy Moore Campaign Officials Hold Press Conference (Video)…


Alabama campaign officials who support Roy Moore held a press conference yesterday to outline the reason for their continued support.  Additionally, several officials confronted and deconstructed the accusations.

The audio is a little sketchy in the beginning:

The Hidden Risk of Broker/Clearer


QUESTION: Dear Mr. Armstrong, Thank you for your work in “educating” us in your “University of the Conscious Investor”! My question relates to your “Trading a Vertical Market” report. I am slowly digesting this report which is truly fascinating and a must read for any rational minded investor. My experience tells me (and you have reaffirmed this within your report) that being able to trade correctly for the market is critical. In analyzing the correct actions we must take I have reached the conclusion that we must also investigate deeply the trading company we use and how any wild ride will impact their ability to actually fund the successful trades we have managed to get into and out of. I recently was issued new T&C’s for my accounts to accept and that makes for scary reading in the light of any major reset or mammoth gap or moves we anticipate. How would you recommend we evaluate the companies actually holding the bag to be able to pay up at the end of the day? This appears to me to be a most crucial question in the light of what Socrates is pointing out.

Be Well,

ANSWER: Yes, you are absolutely correct. Your broker/clearer is an additional risk.

 The kind of market conditions we are about to face will force questions beyond extreme volatility, no bids and the gapping of price and trade. What Traders must realize is that these extreme price actions themselves trigger increased margins, which again could trigger a liquidity crisis. Under such panic moves, prices can gap ‘without’ a trade and is worth remembering people sell what they can not what they should. This forces other markets to move just to raise cash. If market movements are violent everyone is pulled into the mix.

This is when you have to hope that every one of your fellow account owners (under the broker/clearer you are using) is liquid enough to honor margin requirements. This type of information is rarely going to be available to all and so makes many remain vulnerable.

Just to make you aware, it is possible that your money is vulnerable even if you do not have an open position and is just sitting with your clearer if they were to fail.

A lot of people lost money in the MF Global Scandal.